Petrobras: A Shadow of Its Former Self?

Joao Peixe|for Oilprice.com

Published 4:14 PM ET Wed, 8 Aug 2012
Oilprice

Back in 2008, Goldman Sachs listed Petrobras’ share price at $60. Today, it commands $20 a share, and we expect that price to fall further in the future. The Brazilian oil giant just is not what it once was.

Per-Anders Pettersson | Getty Images

Investors are mostly scared by the simple fact that Petrobras does not exist to make a profit for them, but rather to serve the nation in whatever way the Brazilian government sees fit. Following a multi-billion dollar secondary share offering a few years ago and government intervention capping fuel prices and therefore profit, investors are worried that the government is trying to ever increase its control in the company.

The situation is further exacerbated by the fact that Petrobras has just reported its worst results in over a decade, losing over 1.35 billion Brazilian reais ($668 million), down from the 10.9 billion reais in profit it made this time last year.

Chief Executive Maria das Gracas Foster said that they “are working to recover our profitability.” Her task is not an easy one. Petrobras’ profits will continue to be low in all likelihood, because the company's lack of refining capacity means it can't produce the fuel that it needs.